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China's Zombie Economy

149 points by jseliger 3y ago

xwdv 3y ago
It’s bad. Many debt slaves were created in the recent mortgage and housing crisis, and a lot of workers are furious and apathetic working these long hours for little to no pay.
- noselasd 3y ago
  And the same could be said for many countries.
- kwere 3y ago
  Add litle to no bankruptcy laws, and people literally became serfs attached to (bank) property
freitzkriesler2 3y ago
>The Economist projected that China would become the world’s biggest economy by 2018, surpassing the United States. What annoys me about economists is how often they redefine how they calculate things like "GDP" and "unemployment" and then try to compare their new oranges to their old data apples. In many respects, if you use the older metrics China has long surpassed America on its GDP output but with the constant revision America still is "number 1". Same goes for unemployment. You can compare these metrics when you change how they're calculated. As for China, their youth is now experiencing what many in the West and Japan are familiar with: NEETs/hikkimori. They don't see the point in working because the cost of living is too high and their wages stagnant so they go the opposite route and do just enough to get by and enjoy life. I don't blame them either.
- eatonphil 3y ago
  > In many respects, if you use the older metrics China has long surpassed America on its GDP output but with the constant revision America still is "number 1". Maybe, but the Economist is a UK publication. What incentive would they have to prop up the identity of America as number 1?
  - freitzkriesler2 3y ago
    When I say economists I mean the professionals, not the publication. Apologies if that wasn't clear.
    - eatonphil 3y ago
      Sure, but it's The Economist saying this in the article as well: > The Economist now claims that China might never catch up with the US
      - jandrese 3y ago
        Fundamentally China’s huge population means they will overtake the US. Government mismanagement, corruption, and capital imbalances can slow it down but the march of progress is inevitable.
        JumpCrisscross 3y ago
        > Fundamentally China’s huge population means they will overtake the US On one hand, we have reversion to the mean in terms of productivity per capita. On the other hand, we have (a) empirical evidence of the middle-income trap [1] and (b) theoretical underpinning for compounding economic gains as a corollary of economies of scale. In essence, China's dominance is inevitable only if they've solved the middle-income trap problem and either (x) economies of scale cease to matter or (y) the U.S. is destined to failing to capitalize on its own economies of scale. In summary, it's far from certain (though also far from impossible). Also, China's population is shrinking [2]. It's forecasted to drop from over a 4x population advantage over America to less than 2x by 2100 [3]. By that point, Nigeria, Pakistan and the Democratic Republic of the Congo are forecasted to have larger populations than America. Any theory of population determinism must explain how Pakistan will come to dominate America while India dominates China. [1] https://en.wikipedia.org/wiki/Middle_income_trap https://en.wikipedia.org/wiki/Middle_income_trap [2] https://www.reuters.com/world/china/chinas-population-shrinks-first-time-since-1961-2023-01-17/ https://www.reuters.com/world/china/chinas-population-shrink... [3] https://en.wikipedia.org/wiki/Projections_of_population_growthhttps://en.wikipedia.org/wiki/Projections_of_population_growth https://en.wikipedia.org/wiki/Projections_of_population_grow...
- adventured 3y ago
  > In many respects, if you use the older metrics China has long surpassed America on its GDP output Which older metrics are you specifically using to support that claim and can you show me what China's GDP figure looks like compared to the US under that different model?
- throwaway2990 3y ago
  We don’t have real numbers from China to know what their GDP is. There’s theories it could be negative right now which coincides with their housing crisis, huge local debts due to covid, huge cost of living and due to covid less spending which results in less jobs, the world pulling out of China. Etc. any positive numbers would surely be made up, one CCP official already admitted to the numbers being fudged.
  - seanmcdirmid 3y ago
    Surely you mean GDP growth could be negative, not GDP. How would negative GDP even work? That being said, I highly doubt their GDP growth is negative, you just have to build something to record positive GDP, not necessarily sell it. Whatever target the central government sets the provinces will meet on paper, and probably in reality (even if the activity used to generate GDP isn’t useful). I would say look at the Li Keqiang index, but Li was recently fired, so I’m not sure what they are going by now for real numbers.
- gruez 3y ago
  >In many respects, if you use the older metrics China has long surpassed America on its GDP output but with the constant revision America still is "number 1". Can you elaborate on this? What are the "older metrics" in question? >Same goes for unemployment. You can compare these metrics when you change how they're calculated. Is the 20% figure cited in the article somehow not comparable to other figures in the G-7?
  - anovikov 3y ago
    Simply PPP vs nominal.
    - gruez 3y ago
      But in this case nominal vs PPP GDP are both in use. I don't see how "economists" are "redefining" things. It sounds more like OP is seeing "GDP" in separate articles, thinking they're the same thing, and then thinking there's some sort of conspiracy to mislead when he figures out they're in fact different. edit: I did some searching and found a economist article that claimed china's economy would exceed the US's in 2018: https://www.economist.com/finance-and-economics/2011/12/31/how-to-get-a-date https://www.economist.com/finance-and-economics/2011/12/31/h... The article very clearly says that 2018 is the date where its GDP at market rates will exceed the US. So at least for this article, there's no mixups here, only a failed prediction.
    - seanmcdirmid 3y ago
      PPP is a weird measure since a lot of things are even more expensive in China than the USA. Unless you are just eating out and taking taxis, your higher PPP isn’t going to help you much.
      - Aunche 3y ago
        Rent helps a lot when it comes to PPP. Also, services like healthcare, plumbing, education, etc
        3y ago
- anovikov 3y ago
  Well there is GDP PPP and nominal and metrics never changed. China has surpassed U.S. in PPP GDP around 2017 and might at some far away future point around it's historical peak (10-20 years away), get up to 2x the U.S. level, but it might never reach U.S. nominal level (currently 67% of it), or if it does, only briefly and marginally so. None of those metrics has "changed". It's just two different ways of measuring it: PPP defines intrinsic economic power/amount of goods consumed, nominal defines power on world markets/purchasing ability. We produce and consume in national prices that are different (and PPP factor corrects for that difference), but we trade in nominal dollars.
  - peterfirefly 3y ago
    If you trust the official Chinese GDP figures. Big if. Very big if. (All countries seem to do some overcounting but not by 100-400%.)
    - anovikov 3y ago
      I'd say their figures are weird. In some industries, output is truly astounding, making up 60-95% of worldwide total, and that is entirely verifiable and believable. In others, we see obvious lies. No one can really find out the truth, and some attempts to get to the truth only harm reputation of the one trying (like The Economist's own attempt to do it by measuring changes in night illumination, that was incredibly flawed and drew a lot of criticism - https://www.economist.com/graphic-detail/2022/09/29/a-study-of-lights-at-night-suggests-dictators-lie-about-economic-growth https://www.economist.com/graphic-detail/2022/09/29/a-study-...)
      - seanmcdirmid 3y ago
        There was always that guy who was barred from trading in Hong Kong in 2016 because they claimed Evergrande was cooking its books [1]. Safe to say that snooping around China’s economy for real information isn’t going to be appreciated at all. [1] https://en.wikipedia.org/wiki/Andrew_Left https://en.wikipedia.org/wiki/Andrew_Left
jimbursch1 3y ago
“ In its closed financial system, exporters must surrender their foreign earnings to the central bank, which creates equivalent RMB to mop up the foreign currencies. This led to the rapid expansion of RMB liquidity in the economy, mostly in the form of bank loans. ” Can anyone explain this to me? My interpretation is the central bank exchanges exporter’s foreign currency for RMB. How does it become bank loans?
- givemeethekeys 3y ago
  Your deposits are lent out by the bank.
  - have_faith 3y ago
    Banks don't generally lend out deposits.
    - derstander 3y ago
      > Banks don't generally lend out deposits. Do you mean in China or generally? I’m not a finance person but my understanding is that fractional reserve banking is fairly common. https://en.m.wikipedia.org/wiki/Fractional-reserve_banking https://en.m.wikipedia.org/wiki/Fractional-reserve_banking
      - have_faith 3y ago
        I mean generally. This is a pervasively common myth (the Talk section of the wiki article alludes to this). Read about the money multiplier myth, or, a direct source from a central bank about how loans are created by creating new deposits at the point of loan creation: https://www.bankofengland.co.uk/explainers/how-is-money-created https://www.bankofengland.co.uk/explainers/how-is-money-crea... There is a concept of reserve in the system. That is: banks must keep a reserve with the central bank relative to the amount of new money they are creating through loans. At the moment though, that reserve ratio is 0 (zero) for the UK and the US, rendering it meaningless.
FrustratedMonky 3y ago
Question. For 20 years I've been hearing China will takeover, and also that it is about to collapse. It seems like daily there is some story about how China will collapse, and then also stories of how it will still takeover. I did read it, but not seeing what this article brings new. What is the point being made here? Except, things are bad, and nobody realizes it. The term Zombie Economy has been used for a lot of years, when will it actually manifest?
- makotech221 3y ago
  [dead]
- SkyMarshal 3y ago
  You can safely ignore any story that includes “collapse” in its title when referring to a G-20 country. They’re all just clickbait.
  - adaml_623 3y ago
    What about Argentina? 100% inflation!?
    - eclipticplane 3y ago
      Charts go up and to the right!
    - ajot 3y ago
      We can always get the IMF to handle us some big ol' sum of DEGs, not comply with their requisites and ask for some more. I believe we're "too big to fail" for the IMF. But less tongue in cheek, this value destruction will end someday. With every cyclic crisis, a ~10% of our population falls into poverty. Maybe the percentages will become smaller every decade, but theres a feudal 99% poverty rock bottom, you can't really go deeper than that.
    - Izikiel43 3y ago
      Over a 100%, thank you very much
Vt71fcAqt7 3y ago
Clickbaity title. The article is not bad, but he doesn't explain why the declining growth rate is "the logical outcome of China’s uneven development and capital accumulation over the last four decades." I'm still not sold on the "China is dying" theory. China's GDP per capita is the same as Japan's when it entered single digit growth in 1970.[0][1] Those numbers surprised me, though, and may be too low wrt Japan. I think the aging demographic is a greater issue than the ones listed in the OP; economic activity can always be restarted given the underlying conditions are there, which is the case for China in general in my opinion. Demography is destiny, however, and cannot be escaped. The One Child Policy was a mistake for the economy. [0]https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?locations=JP https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?locat... [1]https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?locations=JP https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?location...
- zhdc1 3y ago
  > I'm still not sold on the "China is dying" theory. I don't know if it's as much a story of decline as it is one of unmet expectations. China has a declining (and likely overstated) population. They have a very heterogeneous population. They also have an unsustainable growth model and an unwillingness to 'pull the plug', stop manufacturer subsidies, and tackle local governance issues. In other words, China looks a lot like many other East Asian countries in the past that have pursued an export-led growth model with a de-facto single party government. The difference between China and Korea, Japan, and Taiwan is that the country is - much - larger. Modernization is almost always city-first. It's possible to gloss over a significant rural-urban divide when you have a high population density and a relatively homogeneous population. For comparison, Taiwan's population density is three times larger than China, and that's before you account for the fact that much of the island is essentially inhabitable. All of the infrastructure China has built exists. From what I've been told, the east and south coast cities are the most modern in the world. It's hard to imagine - decline. However, the country has very well known and very large issues that they're unwilling or unable to address. Lower growth and - maybe - some form of stagnation are more likely, (I'm thinking it will be the former after a correction of some kind).
  - 3y ago
billtsedong 3y ago
[flagged]
aaron695 3y ago
Predictions for Chinas GDP growth in 2023 is 5.2% - https://www.reuters.com/markets/major-banks-cut-china-2023-gdp-forecasts-recovery-falters-2023-06-16/ https://www.reuters.com/markets/major-banks-cut-china-2023-g... That's considered to be low. Predictions for the US's 2023 GDP growth is 1.6% They seem to think a pandemic where Chinas response was total lockdown is indictive of the future. > The Economist now claims that China might never catch up with the US That's not how The Economist works
esotericimpl 3y ago
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pphysch 3y ago
It's so tiresome how much of popular geopolitical/macro "analysis" is literally just a linear extrapolation of surface metrics. Almost zero understanding of underlying trends and agendas and how new technology (renewable energy, automation) will disrupt. Growth went from 10% to 5%, therefore it is basically 0% if not negative. Birthrates are down, therefore total demographic collapse is imminent. Some real estate projects failed, therefore all real estate is about to crash. So much noise. But hey, the Strategic Competition Act of 2021 earmarked hundreds of millions of dollars for producing such nonsense.
fuoqi 3y ago
>But many enterprises simply took advantage of easy bank loans to refinance their existing debt without adding new spending or investment to the economy. These companies eventually became loan addicts; and as with any addiction, increasing doses were needed to generate diminishing effects. Sounds like a description of the Western economic situation to me.
- zukzuk 3y ago
  Yup! Complete with the inevitable government bailout that socializes failure while privatizing profits.
  - satvikpendem 3y ago
    Not sure why people point to bailouts as some sort of gotcha, they're loans, not free money. The US government made a profit from the 2008 bailouts: > Early estimates for the bailout's risk cost were as much as $700 billion; however, TARP recovered $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6%, and perhaps a loss when adjusted for inflation. https://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008 https://en.wikipedia.org/wiki/Emergency_Economic_Stabilizati...
    - p_j_w 3y ago
      Where can I go to get such favorable loan terms from the government? Oh, I can’t? I have to get monumentally wealthy by wrecking the economy and driving our society into its biggest financial crisis in 80 years first?
      - satvikpendem 3y ago
        The PPP loans were literally this. They were even more favorable since most were forgiven.
        ang_cire 3y ago
seruda 3y ago
[flagged]
ianai 3y ago
The Economist recently did some interesting rethinking of the unstoppable power of the Chinese economy in their May "Peak China?" edition. Some links (sorry for paywall, but I do find them worth it.) https://www.economist.com/weeklyedition/2023-05-13 https://www.economist.com/weeklyedition/2023-05-13 Is Chinese power about to peak? : https://www.economist.com/leaders/2023/05/11/is-chinese-power-about-to-peak https://www.economist.com/leaders/2023/05/11/is-chinese-powe... How soon and at what height will China’s economy peak? : https://www.economist.com/briefing/2023/05/11/how-soon-and-at-what-height-will-chinas-economy-peak https://www.economist.com/briefing/2023/05/11/how-soon-and-a... How China measures national power : https://www.economist.com/briefing/2023/05/11/how-china-measures-national-power https://www.economist.com/briefing/2023/05/11/how-china-meas... The fall of empires preys on Xi Jinping’s mind : https://www.economist.com/briefing/2023/05/11/the-fall-of-empires-preys-on-xi-jinpings-mind https://www.economist.com/briefing/2023/05/11/the-fall-of-em... In short, they do have a number of functional problems keeping them from further growth. Chief among them is a lack of local resources. They must rely on importing base materials in order to have value added goods to export. Plus some indications that just because their government wants to grow their people may not have such a strong desire. They have something like 34 million more males than females. Also growing signs of toxic financial conditions in their real estate markets including fraud and abuse ("How to escape China's property crisis" https://www.economist.com/finance-and-economics/2023/06/28/how-to-escape-chinas-property-crisis https://www.economist.com/finance-and-economics/2023/06/28/h... and "China’s economic recovery is spluttering. The prognosis is not good" https://www.economist.com/leaders/2023/06/22/chinas-economic-recovery-is-spluttering-the-prognosis-is-not-good https://www.economist.com/leaders/2023/06/22/chinas-economic... , etc)
- christkv 3y ago
  The worry is that internal conflict will lead to external wars as a distraction of the populace.
  - ianai 3y ago
    Yes, which is why I brought up the disparity in the number of the genders in the population. It's that disparity which makes cultures unstable and violent.
bllguo 3y ago
you'd think Western economists and enlightened HN readers might have even a single moment of introspection after being consistently wrong about China for years but I suppose the perpetual condescending and underestimating is preferable to the typical violent modus operandi
- nonethewiser 3y ago
  Wrong about what? The claim im familiar with is that there is systemic risk. That hasn’t been disproven.
- ipnon 3y ago
  China seems to have some serious structural problems that are impeding its rise. For instance it has been reported that negative outlooks by economists are now to be censored, and "deflation" is a bad word.[0] It would be better for everyone if China fixes the issues with its economy so we can go back to cooperatively creating wealth for the world. "Information is antifragile; it feeds more on attempts to harm it than it does on efforts to promote it."[1] [0] https://www.ft.com/content/b2e0ad77-3521-4da9-8120-1f0c1fdd98f8 https://www.ft.com/content/b2e0ad77-3521-4da9-8120-1f0c1fdd9... [1] https://libquotes.com/nassim-nicholas-taleb/works/antifragile https://libquotes.com/nassim-nicholas-taleb/works/antifragil...
isykt 3y ago
Anyone who took a high-speed train from Beijing to Shanghai over the past decade might have caught on to this phenomenon. The number of cities built in the middle of nowhere, with concrete skyscrapers standing empty, is stark and staggering. Seeing them is not only surreal, but gives one the sense of seeing something they ought not to, despite it being right outside the window. The only rationalization that withstands any cursory scrutiny is to think that those towers are the seeds of, say, another Zhengzhou, which more than doubled in population (1.1 to 2.3m people) from 1990 to 2000, then added another 1.2m people from 2000-2010, then added another 1.7m people from 2010-2020 [0]. But then: who will work the 10% of China's land that's arable to feed 1.4B people? And what kind of family will those who came of age during the 1 child policy have in a cramped city? Finally, how the hell is China paying for any of this? Add it all up, and you get what this article is talking about: a zombie economy, dependent on a crumbling world order, surrounded by countries that hold millennia-old grudges against it. Plus Russia. Yikes. [0]https://worldpopulationreview.com/world-cities/zhengzhou-population https://worldpopulationreview.com/world-cities/zhengzhou-pop...
- naveen99 3y ago
  Average living area per person in China is still half of usa, about 350 square feet compared to 700 in usa.
- piyh 3y ago
  Are there no mechanization gains in China to increase ag production per worker? In the short term they're already net importers of food, no reason this can't continue until their population collapses via impacts of 1 child.
  - isykt 3y ago
    China is the world’s biggest importer of meat, dairy, soybeans and corn. The last time they tried an agricultural revolution, approximate 40m people starved to death. The Chinese population already in rapid decline, but not fast enough.
    - 3y ago
74729472616284 3y ago
[flagged]
typon 3y ago
Besides economics, is there another profession where you can be so consistently wrong without facing zero consequences? Maybe op-ed columnist?
bothSidez 3y ago
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datumy 3y ago
I would encourage commenters here to pay a visit to China to see what's happening there with their own eyes. Most commenters never visit China and make some bold comments based on distorted information from MSM. A couple of months ago, I visited my hometown in China, located in one of the poorest regions of the country, and I witnessed how vibrant the local economy is. I attended a Big Data Expo held there, and I was shocked by how deep Big Data and AI are integrated in everyday life and industry over there. I think it's beneficial to know the facts in seeking truth.
- tim333 3y ago
  I agree and I'm not sure the economic arguments along the lines of "overaccumulation crisis" have much predictive value, similar to much economic theory. I also visited China fairly recently, China in 1983 and other culturally Chinese places like HK, Singapore, Taiwan and western areas. My take is the Chinese are a generally a hard working educated people who will do well given the chance. In 1983 the place was reduced to 1$ a day type poverty by Mao style communism. When Deng Xiaoping dropped that and allowed normally capitalism and trade the place boomed as the population started catching up with their cousins abroad. Now Xi who is a Mao fan is rolling back some of the economic freedom such as arresting the AliBaba guy, and threatening the neighbours militarily which is causing the rest of the world to cut back on trade such as the US moving chip production away. I hope Xi doesn't go too nuts politically and start WW3 or something but otherwise I think China will do ok but not boom quite like the pre Xi period.
- throwaway290 3y ago
  Remember that "zombie economy", the bubble before the storm, doesn't mean dead local bazaars. "Big data and AI are integrated in everyday life" should make it clear that author is either naive or shilling. Of course there's big data, with social karma and total surveillance you just must, but if you mean something people actually interact with daily... saw enough sham around it in China that without evidence I will just laugh at this. As soon as tech sector caught on that party wants AI everything instantly is labeled "AI".

149 points by jseliger 3y ago

xwdv 3y ago

It’s bad. Many debt slaves were created in the recent mortgage and housing crisis, and a lot of workers are furious and apathetic working these long hours for little to no pay.

noselasd 3y ago
And the same could be said for many countries.
kwere 3y ago
Add litle to no bankruptcy laws, and people literally became serfs attached to (bank) property

freitzkriesler2 3y ago

>The Economist projected that China would become the world’s biggest economy by 2018, surpassing the United States. What annoys me about economists is how often they redefine how they calculate things like "GDP" and "unemployment" and then try to compare their new oranges to their old data apples. In many respects, if you use the older metrics China has long surpassed America on its GDP output but with the constant revision America still is "number 1". Same goes for unemployment. You can compare these metrics when you change how they're calculated. As for China, their youth is now experiencing what many in the West and Japan are familiar with: NEETs/hikkimori. They don't see the point in working because the cost of living is too high and their wages stagnant so they go the opposite route and do just enough to get by and enjoy life. I don't blame them either.

eatonphil 3y ago
> In many respects, if you use the older metrics China has long surpassed America on its GDP output but with the constant revision America still is "number 1". Maybe, but the Economist is a UK publication. What incentive would they have to prop up the identity of America as number 1?
- freitzkriesler2 3y ago
  When I say economists I mean the professionals, not the publication. Apologies if that wasn't clear.
  - eatonphil 3y ago
    Sure, but it's The Economist saying this in the article as well: > The Economist now claims that China might never catch up with the US
    - jandrese 3y ago
      Fundamentally China’s huge population means they will overtake the US. Government mismanagement, corruption, and capital imbalances can slow it down but the march of progress is inevitable.
      - JumpCrisscross 3y ago
        > Fundamentally China’s huge population means they will overtake the US On one hand, we have reversion to the mean in terms of productivity per capita. On the other hand, we have (a) empirical evidence of the middle-income trap [1] and (b) theoretical underpinning for compounding economic gains as a corollary of economies of scale. In essence, China's dominance is inevitable only if they've solved the middle-income trap problem and either (x) economies of scale cease to matter or (y) the U.S. is destined to failing to capitalize on its own economies of scale. In summary, it's far from certain (though also far from impossible). Also, China's population is shrinking [2]. It's forecasted to drop from over a 4x population advantage over America to less than 2x by 2100 [3]. By that point, Nigeria, Pakistan and the Democratic Republic of the Congo are forecasted to have larger populations than America. Any theory of population determinism must explain how Pakistan will come to dominate America while India dominates China. [1] https://en.wikipedia.org/wiki/Middle_income_trap https://en.wikipedia.org/wiki/Middle_income_trap [2] https://www.reuters.com/world/china/chinas-population-shrinks-first-time-since-1961-2023-01-17/ https://www.reuters.com/world/china/chinas-population-shrink... [3] https://en.wikipedia.org/wiki/Projections_of_population_growthhttps://en.wikipedia.org/wiki/Projections_of_population_growth https://en.wikipedia.org/wiki/Projections_of_population_grow...
adventured 3y ago
> In many respects, if you use the older metrics China has long surpassed America on its GDP output Which older metrics are you specifically using to support that claim and can you show me what China's GDP figure looks like compared to the US under that different model?
throwaway2990 3y ago
We don’t have real numbers from China to know what their GDP is. There’s theories it could be negative right now which coincides with their housing crisis, huge local debts due to covid, huge cost of living and due to covid less spending which results in less jobs, the world pulling out of China. Etc. any positive numbers would surely be made up, one CCP official already admitted to the numbers being fudged.
- seanmcdirmid 3y ago
  Surely you mean GDP growth could be negative, not GDP. How would negative GDP even work? That being said, I highly doubt their GDP growth is negative, you just have to build something to record positive GDP, not necessarily sell it. Whatever target the central government sets the provinces will meet on paper, and probably in reality (even if the activity used to generate GDP isn’t useful). I would say look at the Li Keqiang index, but Li was recently fired, so I’m not sure what they are going by now for real numbers.
gruez 3y ago
>In many respects, if you use the older metrics China has long surpassed America on its GDP output but with the constant revision America still is "number 1". Can you elaborate on this? What are the "older metrics" in question? >Same goes for unemployment. You can compare these metrics when you change how they're calculated. Is the 20% figure cited in the article somehow not comparable to other figures in the G-7?
- anovikov 3y ago
  Simply PPP vs nominal.
  - gruez 3y ago
    But in this case nominal vs PPP GDP are both in use. I don't see how "economists" are "redefining" things. It sounds more like OP is seeing "GDP" in separate articles, thinking they're the same thing, and then thinking there's some sort of conspiracy to mislead when he figures out they're in fact different. edit: I did some searching and found a economist article that claimed china's economy would exceed the US's in 2018: https://www.economist.com/finance-and-economics/2011/12/31/how-to-get-a-date https://www.economist.com/finance-and-economics/2011/12/31/h... The article very clearly says that 2018 is the date where its GDP at market rates will exceed the US. So at least for this article, there's no mixups here, only a failed prediction.
  - seanmcdirmid 3y ago
    PPP is a weird measure since a lot of things are even more expensive in China than the USA. Unless you are just eating out and taking taxis, your higher PPP isn’t going to help you much.
    - Aunche 3y ago
      Rent helps a lot when it comes to PPP. Also, services like healthcare, plumbing, education, etc
      - 3y ago
anovikov 3y ago
Well there is GDP PPP and nominal and metrics never changed. China has surpassed U.S. in PPP GDP around 2017 and might at some far away future point around it's historical peak (10-20 years away), get up to 2x the U.S. level, but it might never reach U.S. nominal level (currently 67% of it), or if it does, only briefly and marginally so. None of those metrics has "changed". It's just two different ways of measuring it: PPP defines intrinsic economic power/amount of goods consumed, nominal defines power on world markets/purchasing ability. We produce and consume in national prices that are different (and PPP factor corrects for that difference), but we trade in nominal dollars.
- peterfirefly 3y ago
  If you trust the official Chinese GDP figures. Big if. Very big if. (All countries seem to do some overcounting but not by 100-400%.)
  - anovikov 3y ago
    I'd say their figures are weird. In some industries, output is truly astounding, making up 60-95% of worldwide total, and that is entirely verifiable and believable. In others, we see obvious lies. No one can really find out the truth, and some attempts to get to the truth only harm reputation of the one trying (like The Economist's own attempt to do it by measuring changes in night illumination, that was incredibly flawed and drew a lot of criticism - https://www.economist.com/graphic-detail/2022/09/29/a-study-of-lights-at-night-suggests-dictators-lie-about-economic-growth https://www.economist.com/graphic-detail/2022/09/29/a-study-...)
    - seanmcdirmid 3y ago
      There was always that guy who was barred from trading in Hong Kong in 2016 because they claimed Evergrande was cooking its books [1]. Safe to say that snooping around China’s economy for real information isn’t going to be appreciated at all. [1] https://en.wikipedia.org/wiki/Andrew_Left https://en.wikipedia.org/wiki/Andrew_Left

jimbursch1 3y ago

“ In its closed financial system, exporters must surrender their foreign earnings to the central bank, which creates equivalent RMB to mop up the foreign currencies. This led to the rapid expansion of RMB liquidity in the economy, mostly in the form of bank loans. ” Can anyone explain this to me? My interpretation is the central bank exchanges exporter’s foreign currency for RMB. How does it become bank loans?

givemeethekeys 3y ago
Your deposits are lent out by the bank.
- have_faith 3y ago
  Banks don't generally lend out deposits.
  - derstander 3y ago
    > Banks don't generally lend out deposits. Do you mean in China or generally? I’m not a finance person but my understanding is that fractional reserve banking is fairly common. https://en.m.wikipedia.org/wiki/Fractional-reserve_banking https://en.m.wikipedia.org/wiki/Fractional-reserve_banking
    - have_faith 3y ago
      I mean generally. This is a pervasively common myth (the Talk section of the wiki article alludes to this). Read about the money multiplier myth, or, a direct source from a central bank about how loans are created by creating new deposits at the point of loan creation: https://www.bankofengland.co.uk/explainers/how-is-money-created https://www.bankofengland.co.uk/explainers/how-is-money-crea... There is a concept of reserve in the system. That is: banks must keep a reserve with the central bank relative to the amount of new money they are creating through loans. At the moment though, that reserve ratio is 0 (zero) for the UK and the US, rendering it meaningless.

FrustratedMonky 3y ago

Question. For 20 years I've been hearing China will takeover, and also that it is about to collapse. It seems like daily there is some story about how China will collapse, and then also stories of how it will still takeover. I did read it, but not seeing what this article brings new. What is the point being made here? Except, things are bad, and nobody realizes it. The term Zombie Economy has been used for a lot of years, when will it actually manifest?

makotech221 3y ago
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SkyMarshal 3y ago
You can safely ignore any story that includes “collapse” in its title when referring to a G-20 country. They’re all just clickbait.
- adaml_623 3y ago
  What about Argentina? 100% inflation!?
  - eclipticplane 3y ago
    Charts go up and to the right!
  - ajot 3y ago
    We can always get the IMF to handle us some big ol' sum of DEGs, not comply with their requisites and ask for some more. I believe we're "too big to fail" for the IMF. But less tongue in cheek, this value destruction will end someday. With every cyclic crisis, a ~10% of our population falls into poverty. Maybe the percentages will become smaller every decade, but theres a feudal 99% poverty rock bottom, you can't really go deeper than that.
  - Izikiel43 3y ago
    Over a 100%, thank you very much

Vt71fcAqt7 3y ago

Clickbaity title. The article is not bad, but he doesn't explain why the declining growth rate is "the logical outcome of China’s uneven development and capital accumulation over the last four decades." I'm still not sold on the "China is dying" theory. China's GDP per capita is the same as Japan's when it entered single digit growth in 1970.[0][1] Those numbers surprised me, though, and may be too low wrt Japan. I think the aging demographic is a greater issue than the ones listed in the OP; economic activity can always be restarted given the underlying conditions are there, which is the case for China in general in my opinion. Demography is destiny, however, and cannot be escaped. The One Child Policy was a mistake for the economy. [0]https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?locations=JP https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?locat... [1]https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?locations=JP https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?location...

zhdc1 3y ago
> I'm still not sold on the "China is dying" theory. I don't know if it's as much a story of decline as it is one of unmet expectations. China has a declining (and likely overstated) population. They have a very heterogeneous population. They also have an unsustainable growth model and an unwillingness to 'pull the plug', stop manufacturer subsidies, and tackle local governance issues. In other words, China looks a lot like many other East Asian countries in the past that have pursued an export-led growth model with a de-facto single party government. The difference between China and Korea, Japan, and Taiwan is that the country is - much - larger. Modernization is almost always city-first. It's possible to gloss over a significant rural-urban divide when you have a high population density and a relatively homogeneous population. For comparison, Taiwan's population density is three times larger than China, and that's before you account for the fact that much of the island is essentially inhabitable. All of the infrastructure China has built exists. From what I've been told, the east and south coast cities are the most modern in the world. It's hard to imagine - decline. However, the country has very well known and very large issues that they're unwilling or unable to address. Lower growth and - maybe - some form of stagnation are more likely, (I'm thinking it will be the former after a correction of some kind).
- 3y ago

billtsedong 3y ago

[flagged]

aaron695 3y ago

Predictions for Chinas GDP growth in 2023 is 5.2% - https://www.reuters.com/markets/major-banks-cut-china-2023-gdp-forecasts-recovery-falters-2023-06-16/ https://www.reuters.com/markets/major-banks-cut-china-2023-g... That's considered to be low. Predictions for the US's 2023 GDP growth is 1.6% They seem to think a pandemic where Chinas response was total lockdown is indictive of the future. > The Economist now claims that China might never catch up with the US That's not how The Economist works

esotericimpl 3y ago

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pphysch 3y ago

It's so tiresome how much of popular geopolitical/macro "analysis" is literally just a linear extrapolation of surface metrics. Almost zero understanding of underlying trends and agendas and how new technology (renewable energy, automation) will disrupt. Growth went from 10% to 5%, therefore it is basically 0% if not negative. Birthrates are down, therefore total demographic collapse is imminent. Some real estate projects failed, therefore all real estate is about to crash. So much noise. But hey, the Strategic Competition Act of 2021 earmarked hundreds of millions of dollars for producing such nonsense.

fuoqi 3y ago

>But many enterprises simply took advantage of easy bank loans to refinance their existing debt without adding new spending or investment to the economy. These companies eventually became loan addicts; and as with any addiction, increasing doses were needed to generate diminishing effects. Sounds like a description of the Western economic situation to me.

zukzuk 3y ago
Yup! Complete with the inevitable government bailout that socializes failure while privatizing profits.
- satvikpendem 3y ago
  Not sure why people point to bailouts as some sort of gotcha, they're loans, not free money. The US government made a profit from the 2008 bailouts: > Early estimates for the bailout's risk cost were as much as $700 billion; however, TARP recovered $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6%, and perhaps a loss when adjusted for inflation. https://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008 https://en.wikipedia.org/wiki/Emergency_Economic_Stabilizati...
  - p_j_w 3y ago
    Where can I go to get such favorable loan terms from the government? Oh, I can’t? I have to get monumentally wealthy by wrecking the economy and driving our society into its biggest financial crisis in 80 years first?
    - satvikpendem 3y ago
      The PPP loans were literally this. They were even more favorable since most were forgiven.
      - ang_cire 3y ago

seruda 3y ago

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ianai 3y ago

The Economist recently did some interesting rethinking of the unstoppable power of the Chinese economy in their May "Peak China?" edition. Some links (sorry for paywall, but I do find them worth it.) https://www.economist.com/weeklyedition/2023-05-13 https://www.economist.com/weeklyedition/2023-05-13 Is Chinese power about to peak? : https://www.economist.com/leaders/2023/05/11/is-chinese-power-about-to-peak https://www.economist.com/leaders/2023/05/11/is-chinese-powe... How soon and at what height will China’s economy peak? : https://www.economist.com/briefing/2023/05/11/how-soon-and-at-what-height-will-chinas-economy-peak https://www.economist.com/briefing/2023/05/11/how-soon-and-a... How China measures national power : https://www.economist.com/briefing/2023/05/11/how-china-measures-national-power https://www.economist.com/briefing/2023/05/11/how-china-meas... The fall of empires preys on Xi Jinping’s mind : https://www.economist.com/briefing/2023/05/11/the-fall-of-empires-preys-on-xi-jinpings-mind https://www.economist.com/briefing/2023/05/11/the-fall-of-em... In short, they do have a number of functional problems keeping them from further growth. Chief among them is a lack of local resources. They must rely on importing base materials in order to have value added goods to export. Plus some indications that just because their government wants to grow their people may not have such a strong desire. They have something like 34 million more males than females. Also growing signs of toxic financial conditions in their real estate markets including fraud and abuse ("How to escape China's property crisis" https://www.economist.com/finance-and-economics/2023/06/28/how-to-escape-chinas-property-crisis https://www.economist.com/finance-and-economics/2023/06/28/h... and "China’s economic recovery is spluttering. The prognosis is not good" https://www.economist.com/leaders/2023/06/22/chinas-economic-recovery-is-spluttering-the-prognosis-is-not-good https://www.economist.com/leaders/2023/06/22/chinas-economic... , etc)

christkv 3y ago
The worry is that internal conflict will lead to external wars as a distraction of the populace.
- ianai 3y ago
  Yes, which is why I brought up the disparity in the number of the genders in the population. It's that disparity which makes cultures unstable and violent.

bllguo 3y ago

you'd think Western economists and enlightened HN readers might have even a single moment of introspection after being consistently wrong about China for years but I suppose the perpetual condescending and underestimating is preferable to the typical violent modus operandi

nonethewiser 3y ago
Wrong about what? The claim im familiar with is that there is systemic risk. That hasn’t been disproven.
ipnon 3y ago
China seems to have some serious structural problems that are impeding its rise. For instance it has been reported that negative outlooks by economists are now to be censored, and "deflation" is a bad word.[0] It would be better for everyone if China fixes the issues with its economy so we can go back to cooperatively creating wealth for the world. "Information is antifragile; it feeds more on attempts to harm it than it does on efforts to promote it."[1] [0] https://www.ft.com/content/b2e0ad77-3521-4da9-8120-1f0c1fdd98f8 https://www.ft.com/content/b2e0ad77-3521-4da9-8120-1f0c1fdd9... [1] https://libquotes.com/nassim-nicholas-taleb/works/antifragile https://libquotes.com/nassim-nicholas-taleb/works/antifragil...

isykt 3y ago

Anyone who took a high-speed train from Beijing to Shanghai over the past decade might have caught on to this phenomenon. The number of cities built in the middle of nowhere, with concrete skyscrapers standing empty, is stark and staggering. Seeing them is not only surreal, but gives one the sense of seeing something they ought not to, despite it being right outside the window. The only rationalization that withstands any cursory scrutiny is to think that those towers are the seeds of, say, another Zhengzhou, which more than doubled in population (1.1 to 2.3m people) from 1990 to 2000, then added another 1.2m people from 2000-2010, then added another 1.7m people from 2010-2020 [0]. But then: who will work the 10% of China's land that's arable to feed 1.4B people? And what kind of family will those who came of age during the 1 child policy have in a cramped city? Finally, how the hell is China paying for any of this? Add it all up, and you get what this article is talking about: a zombie economy, dependent on a crumbling world order, surrounded by countries that hold millennia-old grudges against it. Plus Russia. Yikes. [0]https://worldpopulationreview.com/world-cities/zhengzhou-population https://worldpopulationreview.com/world-cities/zhengzhou-pop...

naveen99 3y ago
Average living area per person in China is still half of usa, about 350 square feet compared to 700 in usa.
piyh 3y ago
Are there no mechanization gains in China to increase ag production per worker? In the short term they're already net importers of food, no reason this can't continue until their population collapses via impacts of 1 child.
- isykt 3y ago
  China is the world’s biggest importer of meat, dairy, soybeans and corn. The last time they tried an agricultural revolution, approximate 40m people starved to death. The Chinese population already in rapid decline, but not fast enough.
  - 3y ago

74729472616284 3y ago

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typon 3y ago

Besides economics, is there another profession where you can be so consistently wrong without facing zero consequences? Maybe op-ed columnist?

bothSidez 3y ago

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datumy 3y ago

I would encourage commenters here to pay a visit to China to see what's happening there with their own eyes. Most commenters never visit China and make some bold comments based on distorted information from MSM. A couple of months ago, I visited my hometown in China, located in one of the poorest regions of the country, and I witnessed how vibrant the local economy is. I attended a Big Data Expo held there, and I was shocked by how deep Big Data and AI are integrated in everyday life and industry over there. I think it's beneficial to know the facts in seeking truth.

tim333 3y ago
I agree and I'm not sure the economic arguments along the lines of "overaccumulation crisis" have much predictive value, similar to much economic theory. I also visited China fairly recently, China in 1983 and other culturally Chinese places like HK, Singapore, Taiwan and western areas. My take is the Chinese are a generally a hard working educated people who will do well given the chance. In 1983 the place was reduced to 1$ a day type poverty by Mao style communism. When Deng Xiaoping dropped that and allowed normally capitalism and trade the place boomed as the population started catching up with their cousins abroad. Now Xi who is a Mao fan is rolling back some of the economic freedom such as arresting the AliBaba guy, and threatening the neighbours militarily which is causing the rest of the world to cut back on trade such as the US moving chip production away. I hope Xi doesn't go too nuts politically and start WW3 or something but otherwise I think China will do ok but not boom quite like the pre Xi period.
throwaway290 3y ago
Remember that "zombie economy", the bubble before the storm, doesn't mean dead local bazaars. "Big data and AI are integrated in everyday life" should make it clear that author is either naive or shilling. Of course there's big data, with social karma and total surveillance you just must, but if you mean something people actually interact with daily... saw enough sham around it in China that without evidence I will just laugh at this. As soon as tech sector caught on that party wants AI everything instantly is labeled "AI".